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The great buzz in the COVID-19 pandemic era apart from the COVID-19 crisis itself, and one that we will recall long after the COVID-19 crisis has receded, is how Vietnam is doing it.
The 2009 film Agora depicts the tragic fate of Hypatia, the female philosopher and mathematician (portrayed beautifully, if historically inaccurately, by Rachel Weisz) who lived in Alexandria in the 4-5th century CE. Even under a Christian Roman emperor, Hypatia’s Alexandria was still the pluralistic, bustling, cosmopolitan Greco-Roman city it had always been, where various pagans (including Neo-Platonists like Hypatia herself) coexisted and transacted with Christians of varying stripes, Jews, and people of other religions. Hypatia’s school itself, although a pagan establishment where she taught philosophy, mathematics, and astronomy, catered to both Christian and non-Christian students. The agora, the traditional Greek public square and market-place, was a metaphor for this pluralism of ideas and beliefs.
Many were surprised when in the second quarter of this year the agriculture sector outpaced industry and services. GDP declined year on year by 16.3% in real terms. Industry and services tanked, having contracted by at least 15.7%. But not the farming and fisheries sector, which posted the lone positive growth of 1.5%. For at least the first half of this year, agriculture’s performance provided the silver lining for the Philippine economy in the months of the COVID-19 pandemic.
Last week, critics of President Rodrigo Duterte finally found something to thank him for. In his first address to the United Nations (UN) General Assembly since assuming the presidency four years ago, the President asserted the Philippine’s territorial sovereignty over disputed areas in the West Philippine Sea/South China Sea (WPS/SCS). The dispute with regional giant China, was the subject of an international arbitration case initiated by the previous administration in 2014 but which was awarded to the Philippines only in 2016, a few weeks after President Duterte took office.
Groundhog Day is one of my favorite films. The film is a fantasy comedy and tells the story of TV weatherman Phil Connors (Bill Murray) arriving in Punxsutawney, Pennsylvania to cover the annual Groundhog Day activities. Groundhog Day refers to Feb. 2 when the town celebrates the tradition of observing whether the groundhog emerging from his burrow foretells the arrival of spring or six more weeks of winter.
THE government’s CREATE (Corporate Recovery and Tax Incentives for Enterprises Act) recovery program, now a pending bill in Congress, proposes to reduce the corporate income tax (CIT) from 30% to 25% or a loss of an aggregate P625 billion in fiscal revenue in five years. This amount of pre-condoned CIT will only grow into the trillions in the future as the economy recovers and grows. This bonanza for business is granted to private registered corporations in the hope that they will then turn and invest the tax savings in jobs and income-creating projects to hasten the recovery. Unfortunately, as economic experience in past economic crises tells us, during an economic free fall, risk-averse business will place much of this bonanza in riskless government treasuries and central bank deposits, thus, defeating the avowed purpose. This profligate generosity to the rich in currently constituted CREATE contrasts with the resistance of the Department of Finance (DoF) to a true debt condonation for agrarian reform beneficiaries (ARBs) which has a large scale-up potential for productivity and investment in the farm sector (the condonation in Bayanihan II is only band aid). This unfairness is a moral stinker!
An important task of national leadership is to highlight information that would otherwise be ignored or set aside. Sometimes this can be as vital as telling the public that it is possible to sterilize their face masks with kerosene. At other times it is to place items on the national agenda that were previously thought to be too contentious or difficult to implement but which new circumstances have made urgent.
I am pleased to share with readers the Executive Summary of the latest quarterly report Christine Tang and I wrote for GlobalSource Partners, a New York-based network of independent analysts, mostly former finance and central bank officials (globalsourcepartners.com).
Scientists know that virgin coconut oil (VCO) has anti-viral properties and strongly believe that our country can add value to VCO and produce a food supplement to strengthen our immune systems against COVID-19 infection, or a medicine with its therapeutic claims vis-a-vis the disease approved by our Food and Drug Administration or other FDAs in the world.
The topic given to me during this seminar on the 29th anniversary of the publication of Some Are Smarter Than Others by Ricardo Manapat is “Oligarchy During the Marcos Regime and its Economic Impact.”
“I dismantled oligarchy in PH without declaring martial law…” was President Rodrigo Duterte’s boast to the soldiery in Jolo, Philippines, on July 13. This inspired a mushroom cloud of reactions. Some pointed to the lie of the avowed neutrality of Malacañang on the ABS-CBN franchise issue; others to the claimed dismantling of the oligarchy as premature; still others, to the possible mere replacement of one set of oligarchs by another of a friendlier persuasion.
There is now no denying the fact behind the desperate statement of doctors and other medical frontliners: we are losing the war on the coronavirus. Despite the world’s longest recorded COVID-19 lockdown — which has prostrated the economy in the worst recession in the post-Marcos era — the Philippines still managed to become the primary hotspot for the pandemic in all of East and Southeast Asia, averaging 4,356 confirmed cases every week (as of Aug. 6). Indonesia is a far second, with an average 1,777 weekly cases. (And if you prefer stock- instead of flow-figures, there are thus far 105.8 confirmed cases per 100,000 population here — only 42.7 per 100,000 in Indonesia.*)
I am pleased to share with readers excerpts from recent posts to subscribers of GlobalSource Partners (globalsourcepartners.com), a New York-based network of independent analysts, mostly former finance and central bank officials. Its subscribers are “investors and business leaders including asset managers, traders and analysts, investment bank economists, private equity investors, corporate CFO’s, and multilateral officials.” Christine Tang and I serve as their Philippine Advisors.
Land reform land reform. Our land reform program has become so messy, so bad for agricultural productivity and economic growth, that it needs a land reform on top of the land reform. Moreover, because land reform in the Philippines took so long — more than 35 years — it has spawned second generation problems that it will take another land reform to undo. (I will explain a bit later.)
We first situate the proposal.
While all businesses have been affected by the pandemic and its associated lockdowns, certain activities have clearly suffered more than others and must contend with a longer period of recovery — if they ever do. Groceries and other markets for fresh and processed food were among the least affected and functioned at some level even under the strictest quarantine. Manufacturing and construction were given the go-signal owing to their value-added and employment contributions. Even public transport is now gradually being restored (jeepneys being the bellwether of semi-normalcy) and smaller retail and dine-in establishments and even personal services requiring proximity such as hair salons have been allowed to function, albeit at much-attenuated levels.
I am pleased to share with readers recent posts to GlobalSource Partners subscribers (globalsourcepartners.com) written by Christine Tang and me on the recent BSP cut in policy rates and on our concerns on public transportation and the T3 ( test, trace, and treat ) program.
Before the Asian Financial Crisis in July 1997, a group of economists which included Dr. Raul Fabella of the UP School of Economics (now a National Scientist), the late former Socio-Economic Planning Secretary Dr. Cayetano “Dondon” Paderanga Jr., former UP Professor and presently Bangko Sentral Governor Ben Diokno, and myself, were calling for a pre-emptive devaluation of the peso.
A curious mix of relief and trepidation (plus exasperation over the lack of transport) has attended the dialing down of Metro Manila’s lockdown from “modified enhanced” to now only a “general” community quarantine. While most people are obviously pleased with the chance to return to work, a feeling of unease still hovers over them owing to the health risks they must face in their simple desire to earn a living.
Create means making something out of nothing. CREATE (Corporate Recovery and Tax Incentives for Enterprises) is a new Department of Finance/National Economic and Development Authority initiative announced in the 14th of May Sulong Pilipinas e-Conference with stimulus in mind. It will replace CITIRA (Corporate Income Tax and Incentives Reform Act). Will CREATE make something out of nothing? Or will it make nothing out of something? Would that it be the former. CREATE’s most salient provision reduces in an instant the corporate income tax (CIT from) 30% to 25% instead of gradually as in CITIRA. This move will punch a huge hole on government tax collection (P625 billion in five years and P42 billion this year by government estimates). The authorities hail this as the “largest stimulus program for enterprises” to speed up recovery from the COVID-19 free-fall. The finance department argues that a massive multiplier effect will follow to recover the loss.
It is disquieting to read a news report about Senate President Tito Sotto promising to fast track the passage of CITIRA (Corporate Income Tax and Incentive Reform Act) by the Senate, justifying it as an urgent measure needed to stimulate the economy. All agree that the economy needs to recover as fast as it can. It was already reported in the first quarter of this year that on a year-to-year basis, the GDP contracted by 0.2%.
After revising its GDP growth target to a more realistic -2 to -3.4%, the government is now crafting its economic recovery program in consultation with private sector stakeholders. I have been asked to provide feedback on the draft Philippine Program for Recovery with Equity and Solidarity (PH-PROGRESO), presented by Planning Secretary Karl Kendrick Chua in a virtual meeting with Manila’s top financial executives (FINEX). Below I share with readers my brief commentary.
The current pandemic has tested the resilience of almost all the country’s institutions -- and found them wanting. Not least affected has been the country’s education system. The prolonged suspension of classes, the abrupt ending of instruction, and the schools’ make-do closures of the school year effectively stopped learning dead in its tracks. While interrupted education may seem a side issue in the face of the more existential threats to life and livelihood, its long-term consequences for the nation’s future cannot be ignored.
As of the fourth week of April 2020, most countries, the Philippines included, are preoccupied with crafting a phased exit from mandated lockdown. The consensus seems to be that a prolonged induced coma can precipitate an economic collapse leading to a tsunami of fatalities only remotely connected to COVID-19. Already, food banks are running low and protests against the lockdown are growing in some states of the USA. Most countries that is, except Sweden and Taiwan.
First off, there’s a difference between economic relief and economic recovery. Economic relief refers to the assistance government must extend to workers and businesses because it ordered them to stop due to the public health emergency. Economic relief is both a humanitarian response -- help people who suffered through no fault of their own -- and an economic one -- to prevent consumer demand from cratering. Economic relief is immediate and urgent. Economic relief also includes the managed transition from a total lockdown to a new normal balancing the needs of public health and the economy.
The World Bank in its economic update of the East Asia and the Pacific dated April 2020 has COVID-19 as its theme. The update bears disappointing facts regarding significant slowing down of several growth drivers. While under a normal situation, global and national economic managers can take corrective actions to boost performance, the problem is we live in extraordinary times because of the COVID-19 pandemic. Given the unavoidable economic cost of containing COVID-19 and saving lives, the world may likely expect another type of a pandemic -- a global economic recession.
The enhanced community quarantine (ECQ) in Luzon, although necessary to contain the spread of COVID-19, has resulted in the grave vulnerability to hunger and poverty of households reliant on non-regular forms of employment and with no savings and little or no access to social protection. Programs intending to alleviate the impact of the ECQ should target them first.
I am pleased to share with readers a post Christine Tang and I wrote for GlobalSource Partners (globalsourcepartners.com ) on March 18 on the potential economic growth impact of COVID-19 and on March 19 on the recent actions government has taken in the monetary and fiscal policy areas.
On Thursday night, President Rodrigo Duterte, upon the recommendation of health officials, announced that for 30 days starting March 15, Metro Manila will be put under “community quarantine,” a term that he said means a lockdown. The measure was in response to the rapidly rising number of COVID-19 infections in the last 10 days, increasing from only three (with one dead) to 140 (with 12 deceased) per the latest count (as of March 15).
Days before the spike of local cases of infection with the SARS-COV-2 coronavirus which causes COVID-19, the Senate Ways and Means Committee was ready to approve its version of CITIRA (the Corporate Income Tax and Incentives Rationalization Act). The proposed law is the second phase of tax reform of the government, which reduces the corporate tax rate and reforms the investment incentives laws of the country.
Since our quarterly outlook issued a little over two weeks ago, the Philippines reported three new cases of the COVID-19 disease in addition to the three cases detected at the time of our report (with one death). In the meantime, travel ban for inbound travelers from certain regions of South Korea has been imposed, alongside that for China and its administrative regions. With the virus spreading rapidly in different continents, the fear is that the virus is spreading undetected within the country. Analysts in the meantime have started to increase their estimates of the adverse impact of the COVID-19 on local growth with some shaving 0.3 percentage points (ppt) off their original forecasts.
We live, it seems, in particularly trying times of multiple and simultaneous “acts of God.” No sooner had the Angat Dam water level gone dangerously low causing water interruptions than the African Swine Fever decimated our hogs, the Taal volcano erupted, and the coronavirus pandemic exploded disrupting lives, livelihoods, and property. Acts of God happen but we can’t say exactly when and where. And when they come calling, they wantonly lay waste to everything along the way. As a society, we are forced to take draconian measures (lockdowns, evacuations, livestock culling) and to hope we can wait out their ravages. In those times, we draw upon the reserves we built in calmer times. These reserves serve as the ramparts that stand between us and extinction. Our “resilience” is, in other words, anchored on those fateful reserves.
One of the bright spots of the economy under Duterte is said to be the rise in the investment ratio. In the last three years (2017-2019), the average proportion of investment to GDP approached 30%. Compare this with the previous six-year period (2011-2016) when the same ratio averaged 22%.
About two weeks ago, President Rodrigo R. Duterte, in an interview with Ted Failon from ABS-CBN, said that he will sign an executive order imposing a limit on the prices of certain medicines. “That’s good for the Filipino, reduced prices or maintaining a price. I will even sign the document twice over,” the President said.
It’s becoming ever more clear that our dysfunctional, weak, inefficient, and corrupt bureaucracy is a binding constraint to growth and development. It belongs up there together with our low agricultural productivity, labor rigidities, and monopolies in strategic industries as major constraints for the country to attain its true growth potential.
Time was when the Philippines held the dubious distinction of being a “Latin American country in the East.” Its growth episodes were short and spasmodic; “boom and bust” aptly describes its longer horizon; investment was at a canter; its till was perennially made empty by waste and venality; and government encroached into the market mindlessly. That was also Latin America Post-WWII. The current development tragedy, Venezuela, is the latest and most virulent example of the Latin American disease presided over most times by populist caudillos who supplanted the imperfect market with their own populist-socialist mishmash.
A new year is typically the time to turn a new leaf -- but maybe not before past accounts have been settled. While the administration has earned plaudits from some quarters for the economy’s performance under its watch (which, to be honest, could have been better), nagging questions continue regarding the social, civil, and human cost accompanying that success. Was it a vital component, even “a necessary evil” in the words of one economic manager? Or was it a purely incidental and gratuitous -- and lethal -- diversion? In other words, would the economy and society have prospered anyway without a mounting pile of bodies (more than 7,000 drug suspects to date)?
The President unleashed a torrent of expletives on the two Metro Manila water concessionaires for supposedly “onerous” contracts. I tried to understand why. After all, this major privatization, undertaken in 1997 during the Ramos administration to respond to a water crisis, was a celebrated case of a working public private partnership and was awarded multiple times for the transparency and design of the bid process and for its success in addressing the core problem of poor water services provision, especially its inclusive business model of connecting millions of poor communities. The concession agreements were subsequently extended during the Arroyo term in recognition of this success and in order to enable more investments in water and sewerage services to be done, pursuant to the Clean Water Act.
We are ending the last quarter of the year, which is our main harvest season and when palay prices are seasonally at their lowest. Farm prices had fallen at an unprecedented rate since the 1970s during this quarter. Surely, the combined effects of the harvest season and rice import liberalization have caused the decline of palay prices and farm incomes. Have they bottomed out, or are they still falling even now in the major rice producing areas?
On Nov. 7, during the Atlas Network’s Freedom Dinner at the Intrepid Sea, Air, and Space Museum in New York City, the Foundation for Economic Freedom, of which I’m President and co-Founder, received the prestigious Templeton Freedom Award. The Award was given in recognition of the Foundation’s work advocating and successfully pushing for legislation removing Commonwealth-era restrictions on agricultural patents, thereby immediately benefiting 2.5 million farmers and energizing the rural land market.